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New CPF rule indicates more Singaporeans may be in financial trouble

It was announced yesterday (28 Aug) that Central Provident Fund Board has changed its rules to allow HDB flat buyers the option to retain up to $20,000 in their CPF Ordinary Account when taking up HDB loans.

Previously, buyers had to first use up all the balance in their CPF Ordinary Account before they can take up the HDB loan. Under the new arrangement, it means buyers would be taking up to $20,000 more in their HDB loan, if they want to retain some cash in the Ordinary Account. However, those who wish to utilize all their balances in Ordinary Account can still do so.

The previous rule was to ensure that flat buyers exercise financial prudence and minimise the housing loan taken, said HDB.

"While this objective remains relevant, some flexibility can be given to flat buyers to provide a buffer in their CPF Ordinary Accounts to pay mortgage installments in times of need, or to improve retirement adequacy if the buffer is eventually not tapped," said a HDB spokesperson.

Experts interviewed by the media are saying that the new CPF rule would provide some relief and flexibility to homeowners who are retrenched or between jobs. Mr Chris Koh, director of property firm Chris Koh International, said that the $20,000 should be able to tide a couple through housing installments of six months to a year, should either of them is out of job.

"In circumstances where people lose their jobs (and) get retrenched, they will panic if they don't have the CPF (monies) to pay their instalments," said Mr Koh. "(With the rule change), at least tomorrow when I get retrenched I won't panic, (because the S$20,000) can service another 6 to 12 months of housing payments," he said.

Others questioned if $20,000 would be enough for those who do not have a stable income.

HDB may have encountered appeals from people who lost their jobs and had to let go of their own homes or downgrade, Christine Sun, head of research and consultancy at OrangeTee & Tie's, surmised. "Maybe they saw an increasing trend (and hence decided to allow for this change)," she guessed.

HDB does compulsorily acquire one's flat

Transitioning.org, a non-profit society set up to cater to the emotional needs of the unemployed, reported a case last year that HDB does carry out compulsory acquisition of one's flat if the family can't keep up with mortgage repayments.

A divorced mother of 2 had revealed this. She said, "My monthly mortgage repayment is about $900. My last job was 3 months ago and my CPF was insufficient. I did not TOP up the cash portion as living cost is just too high."

"I just received the 3rd letter from CPF rejecting again release of SA Funds," she added.

Her ex-husband was a bankrupt at the time of her divorce. "I had to start anew with my 2 kids and the maintenance has been insufficient all these years. In fact he has reduced it on his own accord recently and was a constant recalcitrant not paying in time or at all," the mother lamented.

"I gave up on chasing the defaults as it took my time and emotion from work and also resulted in work terminations when I was emotionally distraught."

She also revealed that she was suffering from on-off depression and amnesia while looking for a good job. She did email HDB to grant her extension for payments but to no avail.

From the HDB letter published by Transitioning.org, it showed that the mother of 2 was indeed behind her mortgage payments for more than 3 years.

To make matter worse, she also failed to attend the meetings scheduled by HDB to discuss her mortgage arrears.

As such, HDB sent her the above letter saying that they would be appointing a valuer to look at her flat so that HDB could proceed with the compulsory acquisition, and pay her the amount ascertained by the valuer. She and her kids would, of course, have to move out once the acquisition is completed.

In any case, for this mother who owed more than $30,000 to HDB, it's not known how the new rule of borrowing more from HDB but leaving $20,000 in Ordinary Account could benefit her.

What people need to fix their problems in Singapore is to have a good stable job that pays sufficiently.


Editor's note: Before one starts to blame the mother in the story, hear what Carrie Tan, executive director of Daughters of Tomorrow has to say about slapping one's perspective over another's life.